The second half of financial year 2024 should represent a significant inflection point for Aspen Pharmacare and form the foundation for sustainable future earnings growth, according to chief financial officer Sean Capazorio in the company’s 2023 annual report, released on Friday.
This as chief executive officer Stephen Saad said Aspen aimed to build and advance its commercial pharmaceuticals footprint with a focus on emerging markets (EMs), with a particular focus on further developing in China.
Capazorio said that in delivering an exceptional performance in the second half of 2023, the group had achieved a solid set of results for the year.
“The positive strides made in bolstering our product portfolio and securing contracts to utilise its sterile manufacturing capacity positioned the group for strong performance in second half financial year 2024, providing a foundational inflection point for accelerated growth in the medium term.”
Looking ahead, he said the targeted reshaping of Aspen’s commercial business over the past few years, together with its recently announced product portfolio additions in Latin America and South Africa, was expected to continue to yield results, notwithstanding the challenging trading environment and the VBP (value based payment) risk in China.
Based upon current exchange rates, Aspen anticipated commercial pharmaceuticals to achieve double-digit reported revenue growth in financial year 2024 weighted towards the second half.
“We have made significant strides in securing contracts to fill our sterile capacity and are focused on successfully executing these agreements. While our manufacturing performance in FY2024 will be impacted by non-revenue-generating technical transfer activities, we do expect to achieve contributions of R2 billion in CY2024, increasing to R4 billion in CY2025,” he said.
Capazorio said anticipated financial year 2024 reported results would receive an uplift should the currently weaker rand currency continue in the year ahead. Based upon current exchange rates, reported normalised Ebitda was expected to grow over the prior year.
Factors anticipated to weigh on performance were the potential downside of VBP in China and the loss of grant funding of $30 million (R566m) for the full year, which was received this year, while the potential upside from product portfolio additions and contract manufacturing revenue was expected to lift performance.
Finance charges would continue to be influenced by the interest rate cycle. Lower targeted manufacturing inventory levels were expected to reduce working capital cash flow investment compared to financial year 2023 and an operating cash conversion rate of greater than 100%was expected, he added.
Chairperson Kuseni Dlamini said that as Aspen celebrates its 25th anniversary as a JSE-listed company, work continued on strengthening its product portfolio, with the recently announced agreements in South Africa and Latin America set to significantly expand its presence in these emerging markets.
“Our strategic investment in sterile manufacturing capacity, including biologicals, in Africa and Europe is starting to bear fruit. Through the agreement reached with Serum Institute of India, we have secured four childhood vaccines, and with support from the Bill and Melinda Gates Foundation and Coalition for Epidemic Preparedness Innovations (Cepi), we are working on transferring manufacture of these vaccines to our Gqeberha manufacturing site in South Africa.
“Through the local manufacture of these vaccines, Aspen will contribute to Africa’s broader primary healthcare programmes and further advance health security for the continent. The recently announced contract manufacturing agreement with Novo Nordisk A/S for the manufacture of Human Insulin at this same site also advances our commitment to expanding access to medicines. Through this collaboration, Aspen will support Novo Nordisk in the reliable supply of insulin vials to diabetic patients in Africa,” he said.
Dlamini said despite a challenging socio-political and economic backdrop, the group delivered solid results in 2023, with revenue growth at 5% (-3% CER), gross profit growth at 3% (-4% CER), and normalised Ebitda growth at 1% (-6% CER).
As regards remuneration Saad was paid R21 million in 2023, down from R22.6m the prior year, while Capazorio was paid R11.5m, up from R10.3m the prior year.
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